FPIs Withdraw ₹13,138 Crore from Indian Equities in September as Crude Oil Surges and US Yields Rise

Foreign Portfolio Investors (FPIs) turned aggressive net sellers in Indian equities during the first half of September, pulling out ₹13,138 crore through September 11. The sharp turnaround halts a two-month buying recovery and reflects renewed risk aversion across emerging markets triggered by rising crude prices, strengthening US bond yields, and an elevated US dollar.

According to depository data from the National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL), foreign investors had previously deployed ₹20,200 crore in July and ₹29,630 crore in August. The sudden shift back to net sales brings cumulative FPI equity outflows in 2026 to ₹2.37 lakh crore, already outpacing the ₹1.66 lakh crore pulled out during the entire calendar year 2025.

Key Drivers Behind the Renewed Selloff

The sudden exodus of foreign capital has been shaped overwhelmingly by macroeconomic pressures originating outside domestic borders:

• Crude Oil Spike: Brent crude jumped to $109.97 per barrel before consolidating above $102 per barrel amid escalating geopolitical tensions involving the US and Iran, putting severe pressure on India's import bill and inflation outlook.
• Firming US Treasury Yields: Upward momentum in US Treasury yields has diminished the risk premium offered by emerging market equities, triggering tactical portfolio reallocation toward dollar assets.
• Federal Reserve Uncertainty: Lingering anxiety ahead of the upcoming US Federal Open Market Committee (FOMC) interest rate decision has tightened liquidity expectations across global bourses.
• Currency Headwinds: A strengthening US dollar index has placed emerging market currencies, including the Indian rupee, under sustained pressure.

Analysts Flag Macro Headwinds

Market observers noted that domestic macroeconomic fundamentals remain resilient, but global asset allocation models are reacting to external shocks.

Vedant Gupte, Co-Founder and Chief Executive Officer of investment platform Trackk, highlighted that external dynamics are dictating flows. "September selling is a dollar-and-crude story, not an India story," Gupte explained. "When US yields firm up and oil climbs, money leaves every emerging market."

Pabitro Mukherjee, Deputy Vice President of Research at Bajaj Broking, pointed to bond yield levels as a vital threshold for global market stability. Mukherjee noted that if the US 10-year Treasury yield moves closer to the 5% mark, world equity indices could witness steeper corrections as foreign funds shift exposure to high-yielding sovereign paper.

Debt Outflows and Domestic Institutional Cushion

Foreign investors also reduced risk exposure in the domestic fixed-income market during the period. Depository data indicates that FPIs offloaded ₹1,350 crore via the Fully Accessible Route (FAR) and ₹955 crore through the general debt route, though they recorded a nominal inflow of ₹29 crore via the Voluntary Retention Route (VRR).

Despite the heavy foreign institutional selloff, headline indices on the National Stock Exchange (NSE) and BSE have avoided steeper drops due to steady absorbing action from Domestic Institutional Investors (DIIs). Supported by regular retail Systematic Investment Plan (SIP) inflows, domestic mutual funds and institutions have continued their net buying streak on Dalal Street, mitigating the downward momentum caused by overseas fund liquidation.

Tags: NSDL CDSL US Federal Reserve NSE BSE